Dodds: Excluding furloughed from minimum wage rise “economically illiterate”

Anneliese Dodds has described as “economically illiterate” the decision by Rishi Sunak to exclude hundreds of thousands of the lowest-paid furloughed workers from the minimum wage increase coming into effect today.

The national living wage rises by 2.2% to £8.91 per hour today as it extends for the first time to people aged 23 and 24, as well as applying to those over 25. But furloughed workers will keep receiving 80% of their pre-pandemic wage.

“This is no April Fool: the Chancellor really has decided to hit the lowest paid furloughed workers with a pay freeze in the middle of a pandemic,” the Shadow Chancellor said this morning.

“That’s on top of his real-terms pay cuts for our NHS Covid heroes, his massive hike in council tax for families across the country and his plans to slash Universal Credit in just a few months.

“Hitting Britain’s families in their pockets isn’t just wrong – it’s economically illiterate. If families have less money to spend, then businesses will suffer and the recovery will take longer. That’s the cost of the Conservatives.”

Many employees who had previously been receiving the minimum wage have been paid 80% of the statutory minimum rate throughout the health crisis as the coronavirus job retention scheme does not have a wage floor.

A petition launched by left Labour MP Richard Burgon, signed by over 16,000, warns that the 80% furlough subsidy provided by the government has left more than two million people earning less than the legal minimum.

Campaigners have called for a £10 minimum. The Joseph Rowntree Foundation said that “too many workers are finding that minimum wage increases are being wiped out due to inadequate social security, insufficient hours and high housing costs”.

An increase to minimum pay of 5.6%, from £8.72 to £9.21 per hour, had been planned initially, but the Low Pay Commission later advised that the proposed increase would be unaffordable for companies struggling in the pandemic.

“Those expecting a decent pay increase today have been let down by the government’s decision to row back on the full rise they were promised. TUC analysis shows that one in three key workers earn less than £10 an hour,” said Frances O’Grady.

The TUC general secretary added: “This can make it tough for them to pay bills and put food on the table. Ministers must get the minimum wage up to £10-an-hour to stop millions of working people from living in poverty.”

Research shows that if statutory pay had kept pace with the average pay of FTSE 100 chief executives, it would now be £11.41 per hour or over £23,700 a year. FTSE 100 CEO pay has risen by 217% since the national minimum wage was first introduced.

Sunak announced a pay freeze for many public sector workers in the Budget last month. Labour criticised the move and trade unions dubbed the freeze an “insult” to public sector workers after their contributions in fighting the pandemic.

For most NHS workers, the Department of Health and Social Care has recommended a 1% pay rise in its submission to the pay review body. “Anything higher would require re-prioritisation,” the government document says.

This amounts to a real-terms pay cut as the increase fails to keep pace with inflation over the next few years. The opposition party has called on the government to honour the 2.1% pay rise originally pledged in its NHS long-term plan.